USD Rebound Likely After Two Days of Falls, US-China Trade War in Focus
USD talking points:
- Optimism that the US and China have reached at least a temporary ceasefire in their trade war should boost USD.
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US-China trade war fears recede
The chances of a US-China trade war appear to be receding further after a Reuters report suggesting that Washington and Beijing are nearing a deal that would remove an existing US order banning American companies from supplying Chinese telecoms equipment maker ZTE.
That should prompt a USD recovery after falls yesterday and early today, particularly as the problems in Venezuela have led to an increase in oil prices. If sustained, those higher prices could lift US inflation and keep the Federal Reserve on track to raise US interest rates around three times this year.
USD Basket Price Chart, Five-Minute Timeframe (May 21-22, 2018)
Against the Japanese Yen, the US Dollar remains not far from the highs reached in late January while EURUSD is still close to levels last seen in December. However, the Euro in particular will likely remain under pressure because of concerns about the political situation in Italy.
You can read more of our trade wars coverage here:
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.